Q4 2021 Telefonaktiebolaget LM Ericsson Earnings Call

Hello, everyone and welcome to today's Ericsson's fourth quarter result, as well as the full year result for 2010 through them.

With me today I have our C U E Oh boy, you called and our CFO and Carl Malone there.

So as usual, we will start with a presentation from Dorian, calling and then we will end the session with Q&A more information on that you will find on our website, but you have to join the call via telephone to be able to ask questions.

So during today's presentation, we will make forward looking statements. These statements are based on our current expectations and certain planning assumptions.

We start subject to risk and uncertainties.

The actual result may differ material due to factors mentioned in today's report press release and discussed in this conference call.

We encourage you to read about these risks and.

And uncertainties in our earnings report as well as in our annual report.

So today, we not only present thing as I said the fourth quarter. It's all they also presenting actually at the full year 10 to 21, and then full year for Ericsson.

Before starting the presentation I would like to ask one question to both blurry on call. These sort of develop that stays in your mind, when you're thinking about 'twenty 'twenty. One so I'll start with you about it but what's sort of the situation event that you would think about it but I think you're back on 2021, I think of a couple of things actually the first one.

It's really the accelerated rollout we see you know five G around the world.

And you know cell phone technology. It has been a fast scaling technology five G is the fastest scaling cellphone technologies, so far and it's a it's quite impressive to see I think that's an important part.

We have seen our investments in technology, and R&D actually paying off in gaining market share as well.

The next part, which I think is equally important is the step we took with the announced acquisition of walnuts.

Which will allow us to build a enterprise business, where we can monetize together with our customers to see S piece on the capability. So five D network by providing the developer community with exposure to the a P is we can actually developing the <unk> network I think that's very exciting.

For the future.

And they've had a full year, so no sort of opportunities to improve your golf Handicap I guess.

Called would you think about our if you think about 'twenty to 'twenty. One I think it's a great Testament to the collaboration efforts of the whole team of 100000 employees in the company actually delivered on all the things that you talked about and the outcome is so strong everything from from topline, placing the customers and so on the up improved.

Stability, but also a cash flow of course, which I think is the maybe the ultimate test them on a hit to the performance in the business a record high cash flow for the year are the best we've seen in the history of Eric since I think that's it's strong and it's a great team effort in Arizona.

Great. Thanks, Karl Thanks, Maria without starter I would actually leave the word to you about here to start the presentation. So please bear.

Thanks, Peter and I Hope your golf Handicap has improved more than mine.

Anyhow, good morning, everyone and welcome today's presentation I'm very happy that so many of you could join so so thanks for being with us.

I am very proud to present, a good ending of 2021 as well as a very strong fourth quarter.

I would say today's report is really a.

Direct result of executing on this strategy, we put in place.

To focus on extending our leadership in the mobile infrastructure business.

And we do that by investing in R&D for technology leadership, but also that we can leverage this position we have in the mobile infrastructure business to establish and grow into a enterprise business, but more on that later on in the presentation.

I also want to take this opportunity to thank all my colleagues out there Exxon for a very strong job done this past year, we faced pandemic challenges, but we've also faced supply chain challenges as well as as inflationary pressures, but I must say, it's a true Testament to.

Their ability to execute basically great achievement on their part.

Five G. As I said before is the fastest scaling mobile technology.

We have seen and deployments around the world have truly accelerated this past year.

And we haven't been able to achieve a leadership position.

So today, we have 109 live five D networks, we have 170 agreements or contracts with customers. Some five D networks.

And we have been able to capitalize on this leadership position to gain market share as well.

We can also see that the investments we've made in technology leadership actually results in a performance.

All of the networks are deployed networks for our customers and we have recently seen basically in three different.

Independent benchmarks that the winners in each of the benchmarks have one thing in Coleman, they actually rely on Eric's on for their primary vendor relationships. So it shows that a while you know the measurements always vary by benchmark understand is very bye bye.

<unk> Mark we can see that we can deliver network performance, that's second to none and that's ultimately what's going to drive our business going forward.

Now, let's hit on a couple of our key.

Key benchmarks from the fourth quarter.

The momentum in our core mobile infrastructure business continued throughout the quarter.

This is of course, something that's basically the cornerstone of the company, we're not going to lose focus on that even as we expand into enterprises.

We offset the impact from the reduced market share in mainland China by growing elsewhere.

So organically total growth was 2%, but if we exclude China for just comparisons are our organic growth was 5%.

For the whole of 2021 we saw an 8% growth if we exclude China.

Profitability remained very strong and we have the gross margin in the fourth quarter of 43, 5% versus four two points seeks a the year before.

And basically that's the result of improvements in all segments.

EBIT margin reached 17, 3% and free cash flow before M&A was the $13 5 billion.

For the full year. Our gross margin was also 43.5 EBIT margin 13.9, and free cash flow of 32.1 billion.

And I would say all of them are indicators of the resiliency and strength of our underlying business.

In our Q3 call I shared a little bit more about our thoughts on on our growth plans into enterprise.

And of course I'm delighted about the step we took during the fourth quarter are there that we're with the announcement of our intent to acquire walnuts.

Based on learnings from our past acquisitions vulnerable will remain a standalone entity.

In there Exxon and operate with limited integration.

This system or do we deployed actually for Cradle point on the integration of Crazy point and there we have been able to execute in line with our investment case and that's despite supply challenges as well as a relatively slow pickup of five G. <unk> modems in the beginning of the year.

So the light integration will allow vault niche to continue to execute on growth on growing the business as well as on the financial performance.

But in parallel with that we will also start to invest in our global network platform that basically will will allow.

Allow them C S piece as well as ourselves to monetize the features of the five G network, we'll call it the performance characteristics or a P. I. So the five D network.

So by.

Developing the a P is we can actually through the volt niche acquisition exposed the a pea is to diebold niche developer ecosystem to drive completely new applications onto digital lighting enterprises, but also for consumers.

We win and and of course in addition to vulnerable our enterprise business consists of our dedicated networks as well as Crazy point in Iot, that's part of the more wireless.

Mobile networks that we are.

Focusing on as well.

We expect both niche to close here during Q1 or possibly into Q2, depending on regulatory approvals and shareholder votes.

I want to also just touch upon the correspondence that we received from the D O J during the fourth quarter.

Where there is a breach.

In the deferred prosecution agreement as air Exxon basically failed.

To provide certain documents of factual information.

I'm, sorry to say, but at this point in time, we will have no further information to share.

But I will say that we will update the market as soon as we have additional information about the matter.

And then we will share it of course.

But in the meantime, I would also say that we continue to invest very heavily in building a world class compliance program and basically a culture of integrity at the company.

We're taking significant investments we took them already last year and we will continue to do that during 2022, our commitment to be world class in compliance stands for.

We reached also our targets our financial performance targets for 2022 oh, 12% to 14% of EBIT margin basically one year early.

I remain very confident about the future growth of our core business the core mobile infrastructure business.

Yeah, So for 2022 we see the targets to remain in place I E. The 12% to 14% if we exclude the volt niche acquisition.

However, we also see that when we determine the target for 2022 that's back in 2018, our business mix looked a bit different and our investment mix looked a bit different so what we see now while we are of course committed to the targets we see in ARPA.

Tune it to develop a very strong enterprise business.

And that is we see a will allow us to also improve profitability over time. So our focus now is therefore to accelerate the achievement of what we said would be the long term target.

15% to 18% EBITA margin and we should be able to do that no later than two to three years out.

In the so so we're we're very excited about the opportunities we see in enterprise, but it's also important that we make sure to accelerate to reach the long term target at S. I think that will put us on a very different growth trajectory as well as profitability develop them.

In the last few years, we've also taken steps to improve the capital efficiency of the company.

And basically we see today that we can operate the company with much less capital than.

Then we could before.

And basically that allows us to to pay cash for the volt niche acquisition and at the same time it does not impede our ability to invest in growing the rest of our company and the rest of our business.

So when we take all these factors into account our the board has decided to propose a dividend of 250 per share.

That's an increase of 25% compared to last year and it reflects the confidence that we have in and stability, we see in our business.

So now moving on to market area of performance for the fourth quarter.

So starting with Europe , and Latin America.

Sales increased by 12% breaking that down we can see that Europe grow, 11% and Latin America, 17% and organic.

Growth.

And this strong development was driven by growth in both networks as well as digital services and this really on tobacco market share gains.

Five gene momentum continues in North America.

We saw a very good development.

Sales increased by 15% driven by strong demand for five days.

And it's worth remembering in in the year, we've actually signed now five year contracts with all tier one operators.

Representing the biggest contracts in our company's history.

And that's been done in North America of course or in the U S.

In Middle East and Africa.

Sales increased by 5% and largely driven by growth in Africa.

Where digital services in particular saw a strong demand for software upgrades.

Sales in North East Asia.

Decreased by 22% year over year, and that's on tobacco materially lower market share in mainland China.

Finally in South East Asia, Oceania and India.

There sales decreased by 13% versus 2020 and that that's really a tough comparison in the fourth quarter primarily for networks.

We buy so networks actually shrank, but we saw a good development in digital services instead.

So, let's look now at the market segments or business segments.

And if we start with networks.

Sales suggested for comparable units and excluding mainland China grew by 6% and we saw double digit growth in North America, Europe , and Latin America.

Gross margin increased to 46.4% compared to 43.5% year over year, and that's really due to operational leverage.

In digital services sales suggested for mainland China increased 3% gross margin increased to 43, 4% driven by increased software sale, which is actually in line with this strategy. We've we have for digital services.

So digital services continues to develop according to the plan and what we are starting to see though is that this five G core.

Or at least starts to go live with customers. We are starting to see revenues being generated from those contracts.

So for 2022 we expect a limited loss for digital services, but is the improvement is going to be tilted towards the second half of the year.

And that is due to the five <unk> networks are increasingly starting to carry traffic throughout 2022.

So managed services sales declined year over year, basically as new deals could not fully offset lower customer demand.

And we also had contract re scoping as well as planned exits.

To grow profits, we will accelerate the ongoing transformation towards a more software driven offering with higher margin potential.

In emerging business and other we're seeing increasing momentum for our five day portfolio and dedicated networks as well as Crazy point.

Both sales and gross margin improved with Crazy point is the main contributor.

The development of Cradle point as I said before is well in line with our acquisition plan.

With that I'm going to leave the word over to Carl.

To go through a little bit more of the details in the report we all do and thank you Maria.

So good morning, everyone and thanks for joining and first I just wanted to also Echo what Maria said earlier I mean, we're very proud of this result.

And it's really a result of our strategy execution, but let's have a look at the numbers done so.

So that's 71.3.

<unk> billion with an organic growth of 2% for the group and if we then adjust for the drop in mainland China, where we have lost market share as we have discussed many times, we have an organic growth of 5% just as a reference them.

And as you saw in in various graph of market areas of course. This growth is really underpinned by our two largest.

The market areas being North America growing at 15%.

Currency adjusted and are not in Europe , and Latin America, 12%. This is a clear result in these cases by market share gains with the customer so that's encouraging to see.

But he also alluded to the global supply disturbances that remained during the quarter.

But really thanks to the supply organization and all the hard work that we manage to.

<unk> continued to build resilience in the supply chain and deliver to customers. According to their.

Demand and in fact, if we look at 2021 we have managed to.

Increase the number of delivered radios every quarter sequentially and in Q4, that's also true year over year.

IPR revenues, a $2 4 billion in the quarter, including a portion of retroactive revenue from one contract that we signed somewhat smaller contract that we signed during the quarter.

And next quarter IPR revenues will be impacted by several expiring patent a renewal discussions and fight the license negotiations.

So assuming we don't assign those during the quarter, we estimate IPR revenues to be.

Between one and one and a half billion in the first quarter 2022.

Oh, you showed us earlier the graph on the gross margin numbers, the rolling four quarter profile. There NFC, so gross margin and excluding restructuring charges amounted to 43, 5%, which is an improvement of 290 basis points year over year with improvement in every segment.

<unk>.

In networks, we saw continued operational leverage.

And indeed as a service is the share of software as a portion of total size increased and of course both of these food.

Fully in line with the strategy.

And indeed, it's a services again are the five core sales started now to progress well and we saw our revenues increasing in the quarter as we deliver on these contracts and of course. This will continue going forward as well to date, we have landed 55 day core contracts.

R&D expenses as you see are now $11 7 billion up from 10, and a half and if Australia. Following our decision to invest across the group in the <unk> portfolio, but also the addition of Cradle point, if we make the year over year comparison.

EBITA at $12 3 billion or.

An improvement of 12% versus last year.

And of course this represents than an EBIT margin of 13 point.

Oh, sorry of 17, 3%, that's where your mindset as well, which is 150 basis point improvement year over year.

I want to point out net income as well strong gross or net income level, 41% up year over year to $10 1 billion of course, it's a result of the improved earnings as such but also reduce the taxes and we'll come back to taxes, a little bit more when we look at the full year performance.

In a moment here and free cash flow as well.

So, let's do exactly that lets turn over to the next slide and look at the full year in numbers.

So reported sales as you see it in $232 4 billion.

Point 3 billion, sorry, which is rather flat reported and compared with last year, but organically, it's a growth of 4%.

And again, if we were to.

I exclude at China, its a growth of 8%.

Hardware now actually consists of 46% of the sales mix in the group that's up from 41% in 2020, our 2020, which is a strong development as well it shows the demand for our offering.

Gross margin.

<unk> improved 290 basis points again to 43 and half percent continued improvements across the board in spite actually all the drop of IPR revenues of about one and $1 8 billion less than last year.

In networks continued operational leverage I said that before also commenting on the quarter, but that's also true for the full year.

And the gross margin in networks was 47%.

Improvement of 320 basis points in networks.

Digital services, 42% gross margin impacted of course as we have discussed.

A lot in these calls earlier impacted by the initial cost for five G core contract deployment.

But that's why I said during the year, we have seen a good increase in revenues from the five year contracts and we expect that to continue as the trafficking.

The network our gross.

Opex as you see here six to 8.8, SG&A, rather flat and they don't have SG&A, we continue to focus on efficiency.

And tight cost control throughout the organization.

And R&D on the other hand grew because we are investing in the five year portfolio.

See growth by $2 6 billion a year over year here, we invest and cloud native portfolio and there is the services and the networks of course in our five D portfolio plus the Cradle point acquisition, which also contributes here.

Abby Jpmorgan came out at 14, 6% and as you know this is the metric we use for the long term target.

And as Glorious now said and this is an important piece of the report today that we said that the long term target is now.

I'm going to be reached that's our expectation and ambition within two or three years.

Yeah.

So continuing down the P&L and the EBIT margin had a $32 3 billion, excluding restructuring up from 29.1.

D C Senate Abbott's margin of 13, 9%, which is just at the upper part of the range for the 2022 target, which thereby is reached one year early bogey set already.

Yeah.

Also a few comments on tax then so as now our profitability grew.

We were also able to utilize a bit more of them are tax assets, we have the withholding tax assets.

Speaker 1: assets we have, the withholding tax assets.

Speaker 1: And effective tax rate now came out at 21 percent.

And our effective tax rate now came out that's 21%.

Speaker 1: compared actually with 35% in 2020, but there was a one-off benefit from impaired withholding tax assets that we were now able to utilize in the fourth quarter. So if we add that back as a bit of a one-off, the effective tax rate would be at 25%, still down 10 percentage units then from 2020.

Compounds actually with 35% in 2020.

But there was a one off benefit from empowered withholding tax assets that we were now able to utilize in the fourth quarter.

And so if we add that back it's a bit of a one off that effective tax rate would be a 25% still down 10 percentage units then from 2020.

Speaker 1: Earnings per share fully diluted 6.81 Swedish kronor and I want to mention return also return on capital employed came out at 18.4 percent.

Earnings per share fully diluted six point 81, Swedish kroner and Elena mentioned return also return on capital employed came out at 18, 4%.

Speaker 1: which is an increase from 17% last year. And both of these numbers include the cash position to the full extent, but we can also calculate excluding cash and then ROCE would then have been 37%.

Which is an increase from 17% last year and.

And both of these numbers include the cash position to the full extent, but we can also calculate excluding cash and then R. O C. He would then have been 37%.

Speaker 1: So let's move from P&L matrix into cash flow and look at how the earnings translated into free cash flow then.

So let's move from P&L metrics into our cash flow and look at how the earnings translated into free cash flow down.

Speaker 1: First of all, cash flow from operating activities increased to 15.2 billion in the quarter.

First of all on cash flow from operating activities increased to $15 2 billion in the quarter.

Speaker 1: and that led us to a full year outcome of 39.1 and this is about 10 billion better than 2020.

And that led us to a full year outcome of 39.1, and this is about 10 billion better than 2020.

Speaker 1: We do put a lot of focus on working capital in our company, end to end, and we have seen the curve improve over all these years, since 2017.

We do put a lot of focus on working capital and our company end to end and we have seen the car or improve our overall this year since 2017.

And.

Speaker 1: Of course this year I can say the working capital was, or this quarter I should say, the working capital was helped by certain prepayments also by customers. And the other important factor that happened in working capital is really the increased investments in inventory levels to manage the supply situation. But on the other hand, I was offset at least partly by an increase in accounts payable during the quarter.

Of course this year I can say the working capital was this.

This quarter I should say they have working capital was helped by certain prepayments also by by customers.

And the other important factors that happened in working capital is really the increased investments in inventory levels to manage the supply situation.

But on the other hand I was offset.

Sat at least partly by an increase in accounts payable during the quarter.

Speaker 1: So if you continue down this table, then you see the free cash flow of $13.5 billion. And this is really the key metric for us, free cash flow before M&A. And that led us to a free cash flow before M&A for the full year of $32.1 billion, which is an increase of $10 billion from the year before. And that in turn was actually an increase of about $15 billion from the previous year, 2019.

So if continue down. This table then you see the free cash flow of $13 5 billion and this is really the key metric for us free cash flow before M&A.

And that led us to a free cash flow before M&A for the full year of 32.1 billion.

Which is an increase of 10 billion from the year before and that in turn was actually an increase of about 15 billion from the.

Previous year 2019.

Speaker 1: And this translates for the full year into 13.8% free cash flow as a percentage of net sales.

And this translates for the full year into 13.8% free cash flow as a percentage of net sales.

Speaker 1: And as you know, we have talked about the long-term target on this metric between 9 and 12. So we clearly beat that target also in 2021.

And as you know we have talked about the long term target on this metric between nine and 12. So we clearly beat that target also in 2021.

Speaker 1: And on the back of this strong cash flow generated during the year and in the quarter, we managed to increase our net cash position with 10 billion. It now amounts to 65.8.

Yeah and on the back of this strong cash flow generated during the year and in the quarter. We managed to increase our net cash position with 10 billion. It now amounts to $65 8 billion and the gross cash position is 97.6 billion up around 26 billion.

Speaker 1: billion and the gross cash position is 97.6 billion up around 26.

Speaker 1: billion if you compare with a year ago and the majority of that increase comes from cash flow that we have generated in the business and a smaller part say about two billion comes from net activities from long-term debt.

If you compare with a year ago.

And the majority of that increase comes from cash flow that we've generated in the business and a smaller part sale of about 2 billion comes from net activities from long term debt.

Speaker 1: and we have checked the history books of Ericsson and so far we haven't found a higher net cash position than than the 65.8 in the history of the company.

And we have checked the history books of Ericsson and so far we havent found the higher net cash position then than the $65 eight in the history of the company.

Yeah.

Speaker 1: Vonage mentioned already by Börje expected to close now Q1 or Q2 and that's as you know a 6.2 billion US dollar acquisition and of course we have as we have continued to build up the cash position now compared with when we announced the acquisition we are going to be able to fund this with cash at hand.

Vonage mentioned already by but would you expect it to close now Q1 or Q2, and that's a as you know a 6.2 billion U S dollar acquisition.

And.

And of course, we have as we have continued to build up the cash position now compared with when we announced the acquisition, we're going to be able to fund this with cash at hand.

Speaker 1: So that's good. And before handing back to you, Börje, here, I just wanted to point you in the direction of page 13 in the report, where we have included certain key data points, including the Deloro market forecast, for example, and some data on seasonality, etc. But with that, thank you. And I hand back to you, Börje. Thank you, Carl.

So that's good and before handing back to your barrier here I just wanted to point you in the direction of page 13 in the report where we have included certain key data points, including the de Lauro market forecast for example, and some data on seasonality et cetera, but.

With that thank you and I hand back to you, but you think your card.

Speaker 1: So, to sum up, we're proud to report a solid quarter to complete a very strong year for Ericsson.

So to sum up we are proud to report.

Solid quarter to complete a very strong year for Ericsson.

Speaker 1: We continue to be well positioned to take advantage of the market growth opportunities as 5G continues to ramp globally. The business momentum remains very strong.

We continue to be well positioned to take advantage of the market growth opportunities as five G continues to ramp globally.

Business momentum remains very strong.

Speaker 1: With a strong core mobile infrastructure business, we can now take advantage of growth opportunities in the enterprise segments. Our expansion into enterprise is focused on leveraging our capabilities from the core mobile infrastructure business.

With a strong core mobile infrastructure business, we can now take advantage of growth opportunities in the enterprise segments.

Our expansion into enterprise is focused on leveraging our capabilities from the core mobile infrastructure business.

Speaker 1: In a few years we will have fundamentally shifted our business mix towards much higher portion of revenues coming from enterprises with a higher growth potential as well as profit potential.

In a few years, we will have fundamentally shifted our business mix towards much higher portion of revenues coming from enterprise says with a higher growth potential as well as profit potential.

Speaker 1: Our strategy is on track. We invest in R&D to deliver technology leadership which in turn can drive incremental growth in our core business.

Yeah.

Our strategy is on track, we invest in R&D to deliver technology leadership, which in turn can drive incremental growth in our core business.

Speaker 1: In wireless enterprise growth, we're committed to closing, of course, the Vonage transaction and and thereby we can continue the excellent work already begun by Rory and the rest of the Vonage team. And we hope they will join.

In wireless enterprise growth, we're committed to closing of course of all niche transaction.

And thereby we can continue the excellent work already began by Rory and the rest of the vulnerable team.

And we hope they will join us very shortly.

Yeah.

Speaker 1: In the longer term we see here that we will also leverage the platform we get through Vonage to create new very valuable APIs for wireless communication and network capabilities and that's going to be delivered through our global network platform.

In the longer term, we see here that we will also leverage the platform, we get through vantage to create new very valuable a P ice for bone for wireless communication and network capabilities and that's going to be delivered through our global network platform.

Speaker 1: All of this means better monetization potential for both our customers the CSPs as well as Ericsson by providing the 5G APIs to Vonage global developer community.

All of this means better monetization potential for both our customers to see us piece as well as air Exxon by providing the five G. A a P is too vulnerable global developer community.

Speaker 1: I'm truly excited of what lies ahead as we gear up for growth, where we expect the enterprise segment, as I said, to provide higher growth potential as well as profitability than our core infrastructure business.

I'm truly excited of what lies ahead as we gear up for growth, where we expect the enterprise segment as I said to provide higher growth potential as well as profitability than our core infrastructure business.

Speaker 1: This makes it now our key focus to really achieve the long term target of EBITDA A margin of 15-18% and we should be able to do that no later than 2-3 years out.

This makes it now our key focus to really achieve.

Achieve the long term target of EBITA margin of 15% to 18% and we should be able to do that no later than two to three years out.

Speaker 1: And at that point in time, we will have a better profit potential or profit mix, as well as growth potential in the company.

And at that point in time, we will have a better.

Profit potential of profit mix as well as growth potential in the company.

So we.

Speaker 2: With that I would like to conclude this part of the presentation and give the word back to you Peter for questions. Thank you, Börje. So we will enter to the second part of this session and that will be the Q&A. So operator can you please kick off that session please?

With that I would like to conclude this part of the presentation I'll give the word back to you Peter for questions. Thank you Maria So we enter to the second part of this session.

Session and that will be the Q&A. So operator can you please kick off the <unk>.

Session. Please.

Speaker 3: Thank you, and ladies and gentlemen, at this time we'll begin the question and answer session. So if you'd like to ask a question, please press the 01 on your push-button phone. And if you'd like to decline from the polling process, please press 02. If you're streaming the webcast, please mute the webcast audio whilst asking a question to minimize any audio feedback.

Thank you and ladies and gentlemen at this time well begin the question and answer session. So if you'd like to ask a question. Please press star zero, one and you push button phone.

If you'd like to decline from the polling process. Please.

I'll kill.

If you're streaming webcast. Please mute the webcast audio whilst asking a question to minimize any audio feedback.

Speaker 2: Great, thank you. The first question is from Alex Duval at Goldman Sachs. Good morning, Alex.

Great. Thank you. The first question is from Alex Duval Goldman.

Goldman Sachs Good morning, Alex.

Speaker 4: Good morning everyone and congrats on the strong results. Thank you very much for the question. Firstly, you delivered another quarter of very strong gross margins, both in the quarter but also on a trailing four-quarter basis.

Good morning, everyone and congrats on the strong results.

Thanks very much for the question. Firstly, you delivered another quarter of very strong gross margins in the quarter, but also on a trailing four quarter basis understanding you talk about investments in product quality, but just curious to what extent this could be due to having less.

Speaker 4: I understand you talk about investment in product quality, but I'm just curious to what extent this could be due to having less of a position in China and how much of a structural benefit that is, and more broadly, what are the key drivers of your strong growth margins and how sustainable should we expect that to be in 2022? A lot of investors are interested in that, just given one of your competitors appears to be executing better on product quality.

In China, and how much of a structural benefit that is a more broadly what are the key drivers of your strong gross margins and how sustainable should we expect that to be to 'twenty, two and a lot of investors are interested not just kidding.

One of your competitors executing better on profitability.

Hum.

Do you think.

Speaker 1: I can start for sure. Thanks, Alex. I think what we see now in when it comes to gross margin, first of all, it's across the board. We see improvement in all segments. That's encouraging for us. It's not just one part, but all parts.

I can start for sure. Thanks, Alex.

I think what we see now in when it comes to gross margin first of all it's across the board. So it's a we see improvement in all segments that are that's encouraging for us it's not just one part but all parts.

Speaker 1: When it comes to the key drivers for Grossmartin, I think it's really the technology level that we are able to offer to customers.

When it comes to the key drivers for gross margin I think it's really the technology level that we are able to offer to customers.

Speaker 1: in combination with the constant improvement of the cost position also of the product, of the offerings. And there I think our R&D team is doing a great job in improving the product.

In combination with the constant improvement of the cost position also all the product of the offerings and I think our R&D team is doing a great job in.

In improving the product designing it for a better cost position.

Speaker 1: designing it for a better cost position, but also actually better and better serviceability, installability in the field, which means a lot as well for the customer satisfaction, of course.

But also actually better and better serviceability install ability in the field, which means a lot as well for the customer satisfaction of course for lead times, but also for our gross margins I think therein lies the key drivers of gross margin.

Speaker 1: for lead times but also for our gross margins. I think therein lies the key drivers of gross margins.

Speaker 1: Anything to add, Borja? Yeah, I would only say that...

Anything to add but I would only say that that.

Speaker 1: You know, the reality is also that we have actually taken market share, which we should remember. And we've said that before, actually is margin dilutive in the short term, but very margin enhancing long term. So and if you look at the numbers, you see actually quite a lot of headwind coming that way. So we feel quite comfortable about the gross margin going forward to be clear on that. Yeah. Thanks for you.

You know the the the reality is also would though we have actually taken market share, which we should remember and we've said that before actually is margin dilutive in the short term.

But very margin enhancing long term, so and if you look at the numbers you see actually quite a lot of headwind coming that way. So we feel quite comfortable about the gross margin going forward.

To be clear on that.

Yeah.

Thanks, Maria and thanks, Alex for that question.

Speaker 2: Move forward to Alexander Peteric at Societe Generale, hello Alexander.

Move forward to Alexander pathetic solicitation around Hello, Alexander.

Speaker 5: Yes, good morning and thanks for the question. I have actually two. One is just in terms of regions, very strong growth in Europe last time and you commented on that already in your opening remarks. But could you perhaps tell us where you are now in terms of market share gains momentum there? Is there still more to come in this region due to geopolitical shifts and where we are in terms of 5G rollouts? Have we seen the peak here or do you still see strong growth going forward there?

Yes, good morning, and thanks. Thanks for the question I have actually two one is just them.

In terms of regions.

Very strong growth in Europe , and I tell them that you commented on that already.

In your opening remarks, but could you perhaps tell us where you are now in terms of market share gains momentum. There is there still more to come in this region due to geopolitical shifts and where we are in terms of five year rollouts.

Have we seen the peak here or do you still see strong growth rate for that.

Speaker 5: And then the second question is more on targets, so congratulations on meeting and receiving them nearly on all counts, but don't you think there's now time to have a new set of comprehensive and more relevant targets beyond just the EBITDA 15 to 18 percent goal? When do you intend to update us comprehensively on that front? Thanks a lot.

And then the second question is more on.

On targets the computer graduations on on meeting or exceeding them near Yodle counts, but don't you think it's now time to have a new set of comprehensive and.

More relevant targets beyond just the EBITA.

Two 8% go when do you intend to update US comprehensive you on that front. Thanks a lot.

Speaker 1: We think we're still relatively early in the 5G rollouts if you look on the globe.

Yeah.

We think we're still relatively early in the five D. Rollouts. If you look on the globe.

Speaker 1: So we will continue to see good demand for 5G going forward, that's for sure. But I would also say one more thing, and that's on market share gains.

So we will continue to see good demand for five G going forward, where does for sure but I would also say one more thing on the and that's on market share gains.

Speaker 1: Your question kind of hinted towards the geopolitical situation being a key driver of the market share gains. I would say it's not. So in the markets where we have gained footprint part of it can be explained by geopolitics but most of it actually is is perfectly competitive markets an open market.

When you your question kind of hinted towards the geopolitical situation being a key driver of the market share gains I would say, it's not so in the markets, where we have gained footprint part of it can be explained by geopolitics, but most of it actually is is perfectly are competitive markets and open more.

Our kids are so so I would say the market share gains in reality comes much more out of a competitive product portfolio and the big investments. We've made in R&D to make sure that we are on the forefront of performance and that's why I had I want to reiterate that when when we.

Speaker 1: So, I would say the market share gains in reality comes much more out of a competitive product portfolio and the big investments we made in R&D to make sure that we are on the forefront of performance. And that's why I want to reiterate that when we start to look at infield performance of our...

Start to look at in field performance of our.

Speaker 1: equipment and networks, we see that we actually have, we come out with very high performance rankings wherever we do them across the board. And that's something we don't take lightly. It's something we invest for and something that we're committed to deliver to our customers.

Our equipment and our networks, we see that our we actually have we come out with very high performance rankings.

Wherever we do them across the board and that's something we don't take lightly it is something we invest for and something that we're committed to deliver to our customers.

Speaker 1: you take the goals question or target. Yeah, exactly. Alexander, you asked about the targets also. I think what is important here is that first of all that we exceeded or sorry we reached the 2022 target one year early. And of course also we do have a different mix. We are investing in enterprise in a way that was not.

Maybe you would take the Gold's question little targets, Yeah exactly that.

Alexander you asked about the targets also.

What is important here is that first of all that we exceeded Oh, sorry, we reached our 2022 target one year early.

And of course also we do have a different mix we are investing in enterprise in a way that was not visible back in 2018, when we put up this 2022 target so it becomes a little bit less relevant than what we'd really want to the message. We really want to send today is that we increase the ambition when it comes to the long term.

Speaker 1: visible back in 2018 when we put up this 2022 target. So it becomes a little bit less relevant. And what we really want to, the message we really want to send today is that we increase the ambition when it comes to the long-term EBITDA 15 to 18, and we move it.

Indeed, a 15 to 18 and we move it.

Speaker 1: towards us in time and saying that we will have the ambition to reach that already in two to three years as opposed to a more diffuse or abstract long-term time horizon. So I think that's the key here and we haven't spent time on the particular parts of 2022 targets. Now we look ahead it's the 15 to 18 percent a bit that will guide us going forward.

Towards us in time in saying that we will have the ambition to reach that they're already intuitive three years as opposed to a more diffuse or abstract of long term time horizon. So I think that that's the key here and we haven't spent time on on the particular parts of 2022 targets now we look ahead, it's the 15th.

10% debates that are that will guide us going forward.

Speaker 2: Okay, thanks Alexander for those two questions. We'll move to Dominic Olsvensky at Morgan and Stanley. Good morning Dom. Hi, good morning everyone.

Okay.

Alexandre for those two questions, we'll move to Dominic <unk>.

Morgan Stanley Good morning, Don.

Sure.

Hi, Good morning, everyone. Thank you for taking my question.

Speaker 6: Two of them. The first one is on the networks outlook. So if we look at Deloro, they've recently upgraded the outlook for RAN.

So to the first one is on the networks outlook. So if we look at the lower they recently upgraded the outlook for Ryan.

Speaker 6: spending cumulatively out to 2025 by about 4%.

Spending cumulatively out 25 by about 4%.

Speaker 6: and roughly half of that is from improving pricing. So could you comment specifically on your ability to price favorably and maybe tie that into what sounds like more limited supply chain disruptions that you've seen recently? So that's the first question.

Roughly half of that is from improving pricing. So could you comment specifically on your but quite favorably and maybe tie that into <unk>.

Like more limited supply chain disruptions that you've seen recently.

Sure.

And the second question is just more briefly.

Speaker 6: The margin performance in 21 is strong given that you have 5% increase in the hardware mix.

The margin performance in 'twenty, one it is strong and given that you have 5% increase in hardware mix.

Speaker 6: So could you maybe just directionally give us a perspective on how the makeshift between hardware, software, and services for 2022, obviously, at this point, let's exclude Vonage from that conversation. Thank you.

So could you maybe just directionally give us a perspective on how the mix shift between hardware software and services.

Obviously at this point that exclude wanted my conversation. Thank you.

Speaker 1: Okay, should I maybe start with the second one around the mix question there? And it's right, we saw an increase of the hardware mix, which is actually very good because it means that we are shipping a lot of 5G equipment to customers as they build out the network.

Okay sure.

Maybe I'll start with the the second one around the mix question, there and it's right, where we saw an increase of the hardware mix.

Which is actually very good because it means that we are shipping a lot of five the equipment to customers as they build out the networks.

Speaker 1: Of course, and this is fully in line with what we want to do on our strategy.

And this is fully in line with what we want to do in our Saturday at.

Speaker 1: At the same time, over time, software will increase its share as well, as network capacity is increased. That's true for networks. It's true for digital services. It's even true for managed services, where we are moving towards more of a software-like model. And, of course, as well in emerging business, which is a lot around scalable software solutions.

At the same time over time software will increase its share as well as networks' capacities is increased that's true for networks is true for digital services.

It's even through for managed services, where we're moving towards more of a software like model and of course as well in the emerging business, which is the road a lot around the scalable software solutions. So I think without going into the specific metrics. There I think we're very happy about hardware, having such a big part of the mix now today.

Speaker 1: So I think without going into the specific metrics there, I think we're very happy about how we're having such a big part of the mix now today. And you see that.

And you see that we deliver great margins, even with such a high part of hardware, which means and it's another proof point of what we've said many times before that the difference in margin between services hardware and software has actually decreased quite a lot over time used to be very large.

Speaker 1: We deliver great margins even with such a high part of hardware, which means.

Speaker 1: And it's another proof point of what we've said many times before that the differences in margin between services, hardware and software has actually decreased quite a lot over time, used to be very large difference.

Speaker 1: But now we're able to deliver both services, hardware and software with decent profitability levels. And we are very happy about that. But overall, I would say the overriding strategy is to increase the software share, which we also see, for example, in digital services in this.

It's Dave Francis.

But now we're able to deliver both services hardware and software with the decent profitability levels and we're very happy with that but overall I would say the overriding strategy is to increase the software side, which we also see for example in digital services in this quarter.

Speaker 1: When it comes to your question on the market and the DeLauro outlook, I think we can repeat when it comes to 2021, the market outlook has constantly increased, the projections have increased. Now DeLauro, looking back at 2021, looks at 13% growth 2021 and now it's 3 or 4% for next year, depending on if China is included or not.

And when it comes to your.

Question on the market and the lower Roe outlook.

Yeah, I think we can repeat when it comes to 2021.

The market outlook has constantly increased the projections have increased now the law was looking back at 20 131 mm looks at 13% growth 2021, and now it's three or 4% for next year, depending on if China is included or not.

Speaker 1: Let's see what will happen with the market. We clearly see a very good momentum, that's for sure, and a very high demand from the customers as evidenced in the fourth quarter. You mentioned the supply, I think we said everything we could around that. We managed to navigate through these disturbances in the fourth quarter and we will certainly continue to monitor that very carefully.

Let's see what will happen with the market, we clearly see a very good momentum that's that's for sure and in very high demand from the customers as evidenced in the fourth quarter then.

You mentioned the supply I think we said everything we could around that that we.

Managed we managed to navigate through these disturbances in the fourth quarter and we will certainly continue to monitor that very carefully going forward.

Speaker 1: Just to comment also on the mix question, one thing that we have worked quite a lot on is to improve the resilience in the company.

Just to comment also on the on the on the mix question I.

One thing that we have worked quite a lot on is to improve the resiliency of the company.

Speaker 1: that one important part of that is to reduce the exposure to business mix.

While an important part of that is to reduce the exposure to business mix.

Speaker 1: as well as geographic mix. So you see us talk a lot less about the mixed questions today than we did before. And the reason is that resiliency. And that's why we also feel more comfortable about operating the company with the lower quality.

As well as geographic mix, so you'll see us talk a lot less about the mix questions today than we did before and the reason is that the that resilience here and that's why we also feel more comfortable about operating the company with the low where.

Call It Oh.

Speaker 1: capital or cash position going forward and I think that's important to keep in mind.

Capital or cash position.

Going forward and I think that's important to keep in mind.

Thanks, Brett and thanks Don.

Speaker 2: We'll move further to the next question. It's from Francois Bougny at UBS. Good morning, Francois.

We will move further.

The next question is from Francois <unk> UBS.

Good morning Francois.

Speaker 7: Good morning everyone. I have two quick questions if I may. I mean one clarification actually first is on your 2022 targets, what the IPR run rate do you assume in terms of sales for the full year 2022 and when you look at your EBITDA target in the two to three years time, what is the IPR as well that you have in this forecast, i.e. the recent negotiations

Good morning, everyone and ask two quick questions. If I may I mean, one clarification actually first season.

Our new 2022 targets, what the IPR run rate do you assume in terms of sales for the full year 2022, and when you look at your EBITDA target.

In the two to three Years' time, what she IPR as well that you have in this forecast.

The recent negotiations do you take that into account on that.

Speaker 7: Do you take that into account or not would be helpful.

Speaker 7: And the second question is on the OPEX, maybe Karl, I mean we have many questions around inflation and the impact and the supply chain.

Would be helpful.

And the second question is on the Opex, maybe call. Let me I mean, we have many questions around inflation and the impact to supply chain.

Speaker 7: Can you help us understand what the OPEX run rate in 2022 may be that you see?

Ken can you help us understand what the Opex run rate in 2022, maybe.

That you see because you saw some seasonality, which is helpful. But I guess Gino is a crunch environment seasonality may it might be a bit different. This time. So just trying to understand the the opex run rate in 'twenty two would be great. Thank you very much. Thanks Francois.

Speaker 7: because you show some seasonality, which is helpful, but I guess, you know, with the current environment, seasonality might be a bit different this time. So just trying to understand the OPEX from 1922 would be great. Thank you very much.

Speaker 1: On the OPEC side, and as you know, we refrain from guiding on specific individual lines too much on the P&L. It's really about the bigger value creation picture. But of course there are inflationary pressures going on. And I can just say that our job when it comes to STNA is of course to...

Should I take that one.

On the Opex side and as you know, we we refrain from guiding on specific individual lines too much on the P&L, it's really about the bigger value creation picture, but.

Of course, there are influenced inflationary pressures going on and I can just say that our job. When it comes to SG&A is of course too to keep at a cost discipline and efficiency to counter that to counter a salary increase pressures and other inflation.

Speaker 1: to keep at cost discipline and efficiency to counter that, to counter salary increase pressures and other inflations.

Speaker 1: Of course, having said that, there are certain investments that we decide to make, they have to do with compliance and security, digitalization, as we have discussed before as well.

Of course, having said that there are certain investments that we decided to make they have to do with compliance and security Digitization as we have discussed before as well, but separate from SG&A. We have R&D in there of course, we will invest if we see long term value from R&D investments, we will certainly do that and we would see both in the core business.

Speaker 1: But separate from SG&A, we have R&D. And there, of course, we will invest. If we see long-term value from R&D investments, we will certainly do that. And we will see both in the core business and in the enterprise side, of course, that we increase investments there.

And in the enterprise side of course that are that we increased investments there.

Speaker 1: When it comes to IPR, I don't want to get into too much of specifics there. Of course, now we are in the situation here with certain renewals going on.

When it comes to IP are a I don't want to get into too much specifics. There of course now we are in the situation here with a certain renewal renew what's going on.

Speaker 1: And so I'll refrain from talking about the mounts there, but.

So.

I'll refrain from talking about the amounts there but.

Speaker 1: Of course, what we try to do is to maximize the IPR revenues that we have.

Of course, what we tried to do is to maximize the IPR revenues that we have we had historically a level of $10 billion.

Speaker 1: We had historically a level of 10 billion, with a different currency rate perhaps, but this is of course the level that we strive to reach and then exceed over time. That's what I can say about IPO.

With the different currency rate, perhaps but this is of course the level that we strive to reach and then exceed over time.

What I can say about the IPO.

Speaker 7: And Carl, just when you say that your mid-term target is to reach 10 billion or so on the IPR, is it what you assume for your long-term target, so EBITDA, then of 15 to 18 percent? Is that what you apply, or do you assume, yeah, just trying to understand your long-term forecast?

And so when you say that your midterm target is to reach 10 billion or so on the IPR is it what you assume for your long term target so EBITDA.

And then the 15% to 18% is that what you apply or or do you assume a yeah just trying to understand your long term forecast.

Speaker 1: Yes, I understand your question. We haven't broken down the 15 to 18 percent in the components as such. We more see that as what we as a group will achieve in two, three years from now. Of course, there is a desire and ambition to grow the IPR revenues, but also margins in other parts of the business will or are expected to improve. So it's going to be a mix and we don't single out individual components at this stage.

Yeah I understand your question, we haven't broken down the 15% to 18% in the components. Our thoughts are we more see that that's what we as a group will achieve in two three years from now.

Of course, there is a there is a.

A desire and ambition to grow the IPR revenues, but also margins in other parts of the business.

We'll or are expected to improve so so it's going to be a mix and we don't we don't single out individual components at this stage.

Thank you very much okay. Okay. Thanks Francois for those two questions, we'll move to Sebastian Esteban, which at the Kepler Chevron good morning Sebastian.

Speaker 2: Okay. Thanks, Francois, for those two questions. We'll move to Sebastian Erstabonowicz at Kepler Chevreux. Good morning, Sebastian.

Speaker 8: Hi everyone and thanks for taking the question. One question around China. How do you see the revenue trending in the coming quarters in China? And also, could you please make an update on the actions you have been taking in the country to sustain profitability so far where we are standing right now?

Yeah, Hi, everyone and thanks for taking the question one question around China.

Who do you see the revenue trending in the coming quarters.

In China and also could.

Could you please make an update on the actions you've been taking in the country to Houston profitability, So far where we are seeing right now.

Speaker 8: The second one would be on the US market, I'm looking at Deloro's forecast for the US calling for only 3% growth in North America in 2022. But when I'm listening to the management of AT&T and Verizon, it seems much more bullish than that in terms of mobile investment for the coming quarters with C-band spectrum deployment picking up. What is your personal view on the US market outlook for the coming quarters? Thank you.

One would be on the U S market looking at <unk> forecast for the U S coding false only 3% growth in North America in 2022, but when I'm listening to us.

The management of AT&T and Verizon because she is much more what do you assume that in terms of mobile investment politically quarters, we see band spectrum deployment picking up what is your personal view on it.

The U S market outlook for the coming quarters. Thank you.

Speaker 1: Should I start with China and you take US, perhaps, Borja? Yeah, on China, we...

Start with China, and you took the U S perhaps Korea.

China.

We.

Speaker 1: see now that the reduced market share that was announced is the one we have basically in the business. We had some uptick in the fourth quarter, but that's more related to seasonality. So we can expect that we will keep this level around 3% market share. Of course, an ambition is to always stay close to customers and try to regain.

See now that the reduced market share that was announced is the one we have basically in the business. We had some uptick in the fourth quarter, but that's more related to seasonality.

So we can expect that that we will keep this level around 3% market share of course, our ambition is to always stay.

They took close to customers and try to regain.

Speaker 1: business and regain market share but for planning purposes I think we can assume that we will stay on that level for now. We have taken some actions in China to reduce...

Business and regain market share, but for planning purposes, I think we can assume that we would say on that level for now we have taken some actions in in China to reduce our.

Speaker 1: cost and to right-size the organization in relation to this new volume that we see in China. And that's already done and we've taken that also restructuring cost associated with that already in Q4. So that's basically done already.

Cost and to right size the organization in relation to this new volume that we see in China, and that's already done and we've taken that and also restructuring cost associated with that already in Q4. So that's a that's basically done already.

On U S. Yeah, if if we look at the.

Speaker 1: the Deloro forecast, and I think it's often hard to predict how the ramp up of a new technology would look like, and I think that's what we've seen for 5G as well, so Deloro has been a little bit behind.

The the lower or a forecast, it's and I think that it's often hard to predict how the ramp up of a new technology would look like and and I think that's what we've seen for five D. As well. So the law has been a little bit behind.

Speaker 1: What is the reality when we look around the world is a very strong demand for 5G and it's on the back of demand from, in a way, consumers and the enterprises to deploy the technology. We see a growing interest from

What what what is the reality when we look around the world is a very strong demand for five G and it's on the back of demand from in a way consumers and.

Enterprises to deploy the technology, we see a growing interest from.

Pretty much.

Speaker 1: you know, across industry sectors, being in mining, being manufacturing, being in logistics. So we see this demand for 5G picking up.

<unk> seen industry sectors being in mining being manufacturing being in logistics. So we see this demand for five <unk> picking up.

Speaker 1: That's why we're, you know, I'm on a more personal level, more optimistic about the growth forecast for 5G, as well as the longevity of the investment cycle. Because, of course, you will first have to build coverage, you will have to build...

That that's why we're you know I'm I'm on a more personal level.

More optimistic about the growth forecast for four five G as well as I am that the longevity of the investment cycle.

Because of course, you will first have to build coverage who will have to build.

Speaker 1: you know, performance in dense urban areas, then you're going to build them in suburban, then you're going to build it on the countryside. So we're going to see, at least this is my view, a little longer investment cycle than we've seen before because the characteristics of 5G is so different from any other mobile technology that in reality was only consumer centric.

You know.

Performance in dense urban areas, then youre going to build them in suburban then youre going to be a little on the countryside. So so we're going to see.

At least this is my view a little longer investment cycle than we've seen before because the characteristics of <unk> is so different from from any other mobile technology that in reality was only consumer centric.

Speaker 1: With 5G, we're opening up one completely new field or new segment being enterprises. So I think we're underestimating the growth potential in 5G rollout.

With five D, where we're opening up one completely new sealed a new segment being enterprises. So I think we were underestimating the growth potential.

Potentially in <unk> rollout.

Speaker 1: uh... but uh... you know where where we have also said that

But you know where where we have also said that.

Speaker 1: not to be caught in our own kool-aid. It's better to take an external forecast. You will suffer from shortcomings, etc. But you know, as you asked, I think it's fair to say that we are more optimistic near-term and even more optimistic long-term.

Not to be a court in our own Kool aid, it's better to take an external forecast you will suffer from shortcomings, etc.

But you know as you asked I think it's fair to say, though that we are more optimistic near term.

And are even more optimistic long term.

Speaker 2: Thanks, Börje. Thanks, Carl, for those answers. Thanks, Sebastian. And then we'll move to Frank Maurer at DNB. Good morning, Frank.

Thanks for your thanks, Caulfield those sensors.

So bastian and then we'll move to Frank.

The D M B a.

Frank.

Yes, good morning.

Speaker 9: My question is really, first, how should we think about the target range that you've provided for networks? I accept the fact that you

So my question is really.

First.

How should we think ball.

Target range to try to shore.

Hum.

Got you.

Speaker 9: say that the 2022 target for the group is no longer very relevant due to changes in the business mix. But if we zoom in on network for a moment, there's a pretty large discrepancy between the target range and what you actually have delivered.

Sure.

2022 targets for the group.

So longer very relevant to keep you interested.

This makes briefly zoom in the network for a moment that of course, there is a pretty large discrepancy between the target range.

Speaker 9: So my questions would be then, is there any key reasons for any margin erosion year-on-year in 2022? For instance, raw material inflation component prices were rising and so on, or do you expect that to basically be offset by the efficiency?

Right.

My questions would be done.

Is there any key regions for any margin erosion year on year in 2022 for instance, raw material inflation component prices rising and so on.

Or do you expect that to basically be offset by the efficiency.

Speaker 9: efficiencies that you pursue in design and R&D and so on.

Efficiencies that you pursue and decline in R&D.

Speaker 9: That is my first question. If I may, I have a quick clarification. Did you say that there actually has been a DPA breach, or was that a misunderstanding on my part? Thank you.

So that's kind of my my first question and then if I may a quick clarification actually if I understood.

Until the BPA bridge issue.

Correct did you say that there actually has been.

Beach was a misunderstanding on my part.

Thank you.

Speaker 1: On the DPA, it's a correspondence from the DOJ that there is a breach, and they can determine that.

On the DPA its a its a correspondence from the D O J a that there is a breach and they can determine that.

Speaker 1: You know, that's kind of their determination. When we have something more to talk about here, we will come back. I just literally would be inappropriate to discuss any of the details.

You know that.

It's kind of up their determination.

Asia, when we have something more to talk about here, we will come back I just literally.

It would be inappropriate to discuss any of the details.

Speaker 1: Okay. Okay. And Frank, on the question of the target, I think, I mean, the real focus here is to move now to this long term, two to three year out EBITDA targets. And so far, we haven't broken that down as to segments, some point we might come back with that. But so far, that is the group target.

Okay, Okay, and Frank on the question of the target.

I think I mean, the real focus here is to move now to this long term a two to three year out the editor targets and so far we haven't broken that down as the segments. Some point, we might come back with that but so far that is the group target.

Speaker 1: 2022 targets were of course broken down by segments and if we look historically then at networks we have been in this range or even above this range that we provided.

2022 targets where of course broken down by segments and if we look historically than at the networks. We have been in this range or even above this range that we provided.

Speaker 1: We are not here today to guide specifically on networks for 2022, but the targets remain, that's what we say. Of course, our entire job is to deliver as good profitability and growth as we possibly can in networks for this year, but also going forward. So I think that's about as much as we can say about that.

And we are not here today to guide specifically on networks for 2022 but the targets remain that's what we say.

Of course, our entire drove base to deliver as good the profitability and growth as we possibly can in networks for for this year, but also going going forward. So I think that that's about as much as we can say about this.

Speaker 1: But let's shift focus now to this two to three year out EBITDA targets. That's really what's going to power our company.

But let's shift focus now to this two to three year out EBITA targets, that's really what's going to power our company now.

Speaker 2: Thanks Frank. We need to move to the next question so thank you Frank and then we'll move to...

Thanks Frank.

We need to move to the next question. So Frank Thank you Frank and then we'll move to.

Speaker 2: Daniel Ljuberg at Handelsbanken, so please, Daniel.

Don't do Barrie Thomas Spinnaker, and so please don't it.

Speaker 10: Thank you very much and thank you for taking my question and congratulations. Two questions if I may. The first is to Karl on the tax rate, effective at 25%.

Thank you very much.

Taking my question and congratulation.

Two questions. If I may the first two columns on the tax rate effective at 25% can you give any.

Speaker 10: Can you give any guidance or some kind of ballpark which could be prudent for 2022 to use, given the mix that you expect?

Items or some kind of ballpark would be prudent for 2022.

To your system given the mix that you expect and also to <unk>.

Speaker 10: And also to Börje, except for this cellular enterprise private networks opportunity, a difference that we see at least between 3G, 4G and 5G is this fixed wireless access, first responder networks, etc. Can you comment a little bit on your view on these markets, if it can also help to prolong the 5G cycle? Thank you.

Except for the cellular enterprise private networks opportunity.

Difference that we see at least between 14 five days this fixed wireless access first responder networks et cetera can you comment a little bit on your view on these markets.

And I also have to prolong the cycle. Thank you.

Okay. Thanks, Danielle yeah on the tax rate.

I would say the 25% that we have now for 2021 that is a good indication of where we should be with the current mix the geographical mix and so on and the profitability levels. We have I think it's it's a fairly good assumption to use going forward as well.

As you know we come from much much higher level and it's really how the company is set up.

Speaker 1: We do have tax losses from past history, as you know, which means that as we become more profitable, the tax rate actually comes down. This is exactly what we see happening now. Then, of course, there will be changes over time in terms of geographical metrics.

We do have tax losses from past history as you know.

Which means that as we become more profitable the tax rate's actually comes down. This is exactly what we see happening now then of course, there will be changes over time in terms of geographical mix.

Speaker 1: Let's say if we increase the presence strongly in the U.S. for example through the enterprise side or other changes that could impact this percentage as well.

Let's say, if we increase the presence strongly in the U S. For example through the enterprise side or other changes that could that could impact this percentage as well.

Speaker 1: But again, if you look at the underlying business today, this is a fair representation of where we should be.

But again, if you look at the underlying business. Today. This is a fair representation of where we should be.

Speaker 1: And you're absolutely right, you know, we're a little bit brushing away some of the actually very big opportunities.

Yeah.

And you're absolutely right.

We're we're little bit brushing away some of the actually very big opportunities.

Speaker 1: like fixed wireless access, like first responders.

<unk> fixed wireless access like first responders.

Speaker 1: Just as a small comparison, what we see in 4G, where actually fixed wireless access have been rolled out in certain countries around the world, we see a very rapid uptick.

There's a small comparison, what we see in <unk>, we're actually fixed wireless access have been rolled out in certain countries around the world, we see a very rapid uptake.

Speaker 1: or uptake of that service. And that is nowhere near where it will be on a 5G network. So we're actually very optimistic that we will start to see fixed wireless access to be rolled out across the world in many geographies and actually provide an additional market segment that today is rather limited. And the interesting thing, when

Our uptake of that service and that is nowhere near where it will be on a five G network, So where we're actually very optimistic that we will start to see fixed wireless access to be rolled out across the world in many geographies and actually provide an additional market segment.

That today is rather limited.

And the interesting thing when you look at you know me.

Speaker 1: You know, many countries have a commitment to build out broadband to the consumer and to households.

Many countries have a commitment to build out broadband to the consumer and to households, and provide you know 98% coverage and some say hundred percent et cetera.

Speaker 1: and provide 98% coverage and some say 100% etc.

Speaker 1: actually wireless is a much faster way to do that and you can almost in most countries.

Actually wireless is a much faster way to do that and you can almost in most countries build out to five <unk> coverage that will give you a true broadband experience for the consumer in much shorter time at a much lower cost.

Speaker 2: build out the 5G coverage that will give you a true broadband experience for the consumer in much shorter time at a much lower cost.

Speaker 2: than you can do with a fixed network. So I'm actually convinced that we're going to see fixed wireless access becoming a large sub-market in the 5G consumer market.

And then you can do with their fixed network. So I'm I'm actually convinced that we're going to see fixed wireless access becoming a large sub market in the five G consumer market.

Speaker 1: then we're going to see the enterprises which clearly has a lot of interest. It's probably going to take a little bit longer for that to materialize than I think fixed wireless access.

Then we're going to see the enterprises, which clearly has a lot of interest, it's probably going to take little bit longer for that to materialize and I think fixed wireless access.

Speaker 2: we see first responders around the world they have already migrated over to 4G to some extent but we see an increasing interest to go over to 5G as well so there are a number of

We see first responders around the world they have already migrated over to <unk> to.

For G to some extent.

But we see an increasing interest to go over to five G. As well. So so there are a number of.

Speaker 1: call them new segments which have not really been factored into the market forecast for 5G and that's why I say that my perspective is we will see higher growth much longer than anyone predicts today.

Call them, new segments, which have not really been factored into the market forecast for five G and that's why I say that my perspective is we will see higher growth much longer.

Then anyone predicts today.

Speaker 2: Thanks. Thanks, Daniel. Thank you very much. Yeah. Thank you, Daniel. We will move into this session's last question, but I see you have quite a long line here. And please reach out to either the IAR team or the media team so we can answer those questions. So the last question is from Peter Kurt Nilsson at ABG. So please.

Thanks, Thanks for doing it.

Okay. Thank you very much yeah. Thank you Don if we were to move into do these sessions last question, but I see you have a quite a long line here Blitz. It reached out either the IR team or the need of so we can answer those questions. So the last question is from Nielsen.

So please.

Peter.

Speaker 9: Thank you, Peter. I'll do it briefly. A question on digital services, please. You reiterate your expectations for 2022 with a positive tilt towards the second half of the year. Your comments on your long-term margins potentially exceeding those in digital services. Would it be correct to interpret...

Thank you Peter.

Thank you gentlemen, a question on digital services.

Please.

Each with your expectations for FY, 'twenty, two which was.

Positive towards the second half of your comments on your long term margins potentially exceeding those in digital services, what would it be correct to interpret.

Speaker 11: Your view on digital services is that once the business turns break-even, positively impacted by the growing 5G core revenues, the curve towards those profitability targets will perhaps be steeper than initially thought, and that the route post break-even up to those targets will be quite quick. Would that be a correct interpretation? Thank you.

So I was just at once.

The business turns breakeven positively impacted by the by the growing <unk> core revenues the curve towards those profitability targets will perhaps be steeper than initially thought.

And the route.

Break even though.

These targets will be will be quite quite quick would that be a correct interpretation. Thank you.

The reality is the turnaround of digital services will be on the back of better software revenues and that's why I would also say that my prediction is that we will as soon as we reach breakeven and reached the volume to be at breakeven.

Speaker 1: and that's why I would also say that my prediction is that we will as soon as we reach break-even and reach the volume to be at break-even it's actually a smoother development and faster development to reach the higher margins.

It's actually a smoother development and faster development to reach the higher margins.

Speaker 1: But it requires us to gain the volume, the software volume, to reach the break-even. That's going to take a bit of time, especially when we lost China. And as you know, China is really...

But it's it requires us to gain the volume the software volume.

To reach to breakeven that's going to take a bit of time, that's that's what we especially when we lost China.

And as you know China is really the first.

Speaker 1: country to roll out any massive traffic on 5G networks, so that's why it's so meaningful that we lost that. But now we see that the rest of the world will start to generate those revenues, but they come in the future.

Country to roll out any massive traffic on five gene networks. So that's why it's so meaningful that we lost out.

But now we see that the rest of the world will start to generate those revenues, but they come.

In the back of this year.

Thanks, Paul Yeah. Thanks, Thank you.

Thank you very much.

Before ending today's Q&A.

A Q&A session presentation over the Q1. So Q4 is sold for 2021 a short closing remark from Hubert.

Speaker 1: Well, thanks, Peter. And thanks, everyone, for listening in. We feel that we're continuing to execute on our strategy to.

Thanks, Peter and thanks, everyone for listening in we feel that we're continuing to execute on our strategy too.

Speaker 1: extend the leadership in the core mobile infrastructure business.

Extend the leadership in the mobile core mobile infrastructure business, where we see very strong demand for five G. As we have discussed now, but we also see a great opportunity to pivot the company towards a enterprise business, which will establish over the coming few years.

Speaker 1: where we see a very strong demand for 5G, as we have discussed now. But we also see a great opportunity to pivot the company towards an enterprise business, which we will establish over the coming few years. And in two to three years, it will be a meaningful contributor to reaching the long-term target of an EBITDA margin of 15 to 18 percent. And we see that we should be able to do that in the next two to three years.

And in two to three years, it will be a meaningful contributor to reaching the long term target of an EBITA margin of 15% to 18% and we see that we should be able to do that in the next two to three years.

Speaker 1: and we're at least on this side extraordinarily excited about the outlook for the 5G market but also what we can do in the enterprise field.

And.

There at least on this side extraordinarily excited about the outlook for the five D market, but also what we can do in the enterprise fleet.

Thank you.

<unk>.

Okay.

[music].

Speaker 12: No.

[music].

[music].

Speaker 12: St.